Archive for the ‘General Management’ Category
On the nature of decision-making in organisations
Introduction
Decision-making is a key activity at all levels in an organisation. All employees make decisions: from the front-line employee who has to decide how to handle a difficult customer to an executive who has to choose between projects that are competing for funding. Given this it is no surprise that a vast body of knowledge – decision theory – has been developed to support the process of decision making.
Decision theory concerns itself with rational decision making– that is, decisions that are based on an objective evaluation of available options and their consequences, leading to a choice that is made on the basis of such an evaluation alone. In reality, though, many decisions are not made this way. In this post I look at the different ways in which decisions are actually made in organisations, drawing on a brilliant essay by James March entitled, How Decisions Happen in Organizations.
Decision making as a rational process
The standard view of decision making is that it is a process of rational choice based on:
- Knowledge of alternatives
- Knowledge of the consequences of each of the alternatives
- Ordered preferences by which consequences can be evaluated
- Rule(s) by which a particular alternative can be selected
In its basic form, decision theory assumes that each of the above is fully known. As March states:
In the most familiar form of the model, we assume that all alternatives, the probability distribution of consequences conditional on each alternative, and the subjective value of each possible consequence are known; we assume a choice is made by selecting the alternative with the highest expected value. This emphasis on expected value may be moderated by a risk preference (i.e.,some value associated with the variability of the outcome distribution).
However, there are a number of challenges to this ideal picture of decision-making. These include:
- Uncertainty about consequences of actions: The standard theory of rational choice assumes that decision-makers have knowledge of all possible outcomes of actions. However, this is not possible because humans are boundedly rational – their ability to seek and process information is limited by their cognitive abilities and available resources. Quite often it happens that consequences reveal themselves only after a decision has been made and implemented. As March mentions, “…management requires tolerance of the idea that the meaning of yesterday’s action will be discovered in the experiences and interpretations of today…”
- Uncertainty about preferences: The standard theory assumes that preferences are stable and consistent. Quite often, it happens that preferences change with time and different preferences can be inconsistent with each other.
- The role of risk: Typically, in theories of rational decision making risk appetite (of an individual or organisation) is treated as a single fixed number. In reality, it varies with situational factors such as level of threat to survival, excess resources available etc. Moreover, it also depends on the (often unarticulated) hopes and fears of individuals who are making the decision.
- Conflict between decision makers: Rational theories of decision making assume that conflict between decision makers can be resolved by (rationally!) evaluating conflicting alternatives and choosing the best one based on an agreed decision rule. The problem is that in such situations it is often impossible to come up with such a decision rule. Negotiations over criteria can go on interminably and conclude without agreement. March suggests that the reasons why decisions get made despite this is that people rely on trust and reputation rather than formal agreements in order to reach a consensus.
So as we see, the rational view of decision making has less practical relevance than one might expect. It is part of the story of decision making, but definitely not the whole tale.
Decision making as a rule-based activity
An alternate logic of decision making is that of following rules, obligations and duties; doing what is appropriate rather than what is rational. As March puts it:
Much of the decision-making behavior we observe reflects the routine way in which people do what they are supposed to do. For example, most of the time, the majority of people in organizations follow rules, even when it is not obviously in their self-interest to do so. Much of the behavior in an organization is specified by standard operating procedures, professional standards, cultural norms, and institutional structures. The terminology is one of duties and roles rather than anticipatory, consequential choice.
Within a logic of appropriateness, people make decisions by mapping the aspects of the decision they are required to make to what is appropriate in such situations. In particular, they consider the following:
- Situation: what kind of a situation is this?
- Identity: who am I? What kind of position do I hold in the organisation?
- Determining an appropriate choice: What should a person like me (or in my position) do in this kind of situation?
In such a process the focus is on doing what is right (as per the rules) rather than searching for rationally determined best choice.
The interesting question is how these rules come into existence. March describes three ways in which this happens:
- Rules are developed through experience and are modified by feedback on what worked well and what didn’t. In this view organisations create rules.
- Rules are selected (rather than developed) based on their suitability for a group or organisation. In this view, rules have an existence independent of organisations.
- Rules spread from organisation to organisation – much like “fads or measles.” In this view, rules are created in idiosyncratic ways (through an innovative or quirky choices made by an individual, say) and then, if they are successful, are copied others. Many popular management practices have their roots in such fads.
Summarising: decisions can be based on appropriate choices rather than rational ones.
Decision making as a contingent event
The views of decision making embodied in the logic of rationality and appropriateness assume that the cause-effect relationships between decisions and outcomes are well understood and that organizational rules and hierarchies actually control outcomes. However, in reality things tend to be less straightforward. For example:
- Many things happen at the same time, each competing for the attention of decision makers. The attention a decision maker gives to a problem thus depends on the other things that are on her mind at the time.
- Individual perceptions of situations vary, thus making the formulation of a decision problem difficult (in effect, making it a wicked problem).
In cases such as these, the decisions are contingent on factors that have nothing to do with the decision itself. As examples, an executive who is distracted by personal problems may not give enough attention to a decision problem at hand and a bunch of stakeholders who cannot agree may end up making a decision that cannot be justified via rationality or appropriateness.
Decision making as a byproduct of other factors
The assumption underlying the foregoing discussion is that decisions affect outcomes and hence that decisions matter. However, as March points out:
Descriptions of decision arenas often seem to make little sense in such terms. Information that is ostensibly gathered for decisions is often ignored. Contentiousness of the policies of an organization is often followed by apparent indifference about their implementation. Individuals fight for the right to participate in decision processes, but then do not exercise the right. Studies of managers consistently indicate that very little time is spent making decisions. Rather, managers seem to spend time meeting people and executing managerial performances.
Based on the above, March makes the interesting point decision making is often a ritual activity that has little to do with the actual decision itself. The process of making a choice provides decision makers opportunities to do other things such as:
- Presenting and justifying their viewpoints to their peers.
- Distributing credit or blame for what has occurred.
- Reaffirming loyalties and friendships
- Socialising!
An aspect of decision making made highlighted in the previous section is that there are many competing demands on a decision maker’s attention – for example, family, friends or personal goals. This is true in general: in the course of our lives, we are presented with a steady stream of choices, opportunities and problems. The degree to which each of these hold our attention depends on a host of factors including (but not restricted to) our values, duties and priorities. Because of these concurrent or nearly concurrent issues, the attention we give to a decision problem is closely linked to events that have recently occurred or are anticipated in the near future, and the priorities we assign to these. In such situations, the logic of decision making is temporal (dictated by time) rather than consequential or rule-based. In other words, our decisions depend on recent events and our immediate (or recent) environment.
Conclusion
In this article I have summarised various views of decision making drawing on the work of James March. We have seen that the official line about decision making being a rational process that is concerned with optimizing choices on the basis of consequences and preferences is not the whole story. Our decisions are influenced by a host of other factors, ranging from the rules that govern our work lives to our desires and fears, or even what happened at home yesterday. In short: the choices we make often depend on things we are only dimly aware of.
Four organisational myths
One of the ways we make sense of the world is by organising our experiences into stories. More often than not our narratives gloss over complexities, emphasising only those aspects or events that we want to. For example, I might tell a tale of my involvement in a successful project, talking up things I did that worked well while ignoring those that didn’t. The message implicitly conveyed by such a story is that my actions were responsible for the success of the project. Many stories in organisations are built on a similar theme: that success is a consequence of reasoned actions. This is an example of the myth of rationality.
In this post I look at a few myths that are common in organisations, highlighting how they mislead because they overlook other important factors. My discussion draws upon a brilliant (and short!) book by James March entitled, The Ambiguities of Experience.
According to March, organisational stories frequently contain one or more of the following mythic themes:
Rationality: This is theme described earlier, that successes are consequences of reasoned actions. Most folks who work in organisations tacitly subscribe to this myth. One can see this myth at work when people are asked to justify why they took certain actions. Their answers are usually framed in terms of rational expectations of the consequences – i.e. that they rationally expected certain outcomes to follow from their actions. This is true regardless of whether the actions were actually thought through or not. Think about it: what was the answer you gave your manager the last time he or she questioned an action you took?
Hierarchy: This refers to the way in which problems and challenges are analysed. Typically problems are assumed to be decomposable into constituent sub-problems. Solving a problem is thus reduced to tackling the sub-problems. In organisations, this scientific-rational approach is more or less taken for granted as being the only way to solve problems. In reality, however, many organizational issues are wicked – they are difficult to define unambiguously, let alone solve. As an example, see this paper by John Camillus which discusses how the formulation of an organisation’s strategy has elements of wickedness. In our recently published book, The Heretic’s Guide to Best Practices, Paul Culmsee and I discuss how such issues can be tackled using a range of collaborative techniques.
Leadership: Another persistent theme in organizational lore is that of the significance of leaders. One indicator of this is the number of hagiographies of successful CEOs in the management section of bookshops. Another is the number of management school case studies that attempt to link the successes of organisations to the actions of their leaders. In truth, although the actions of a CEO may set the overall direction for an organisation, success or failure depends on a host of other factors that executives have no control over, including the actions of many other people internal and external to the organisation.
Historical efficiency: This is the idea that organisations and ideas compete with each other, and those that come out on top are the best. This myth is commonly seen in the literature of vendors who peddle “good” or “best” organisational practices. In many cases, however, the popularity of these practices has more to do with relentless marketing than inherent quality. Other, possibly better practices may not succeed in gaining mindshare simply because they lack the means to get the message out. Similar myths are common in official histories of organisations: those that do well generally tell their stories in terms of their “unique characteristics” that enabled them to do well in the competitive marketplace. This myth also gets a fair bit of airtime in our book.
These myths are so pervasive in management and marketing literature that we accept them unquestioningly. Now that you know them, you will see them crop up in all kinds of places: marketing brochures, management case studies, biographies of business leaders and even on company web sites (the “About us” page is a good place to start). The point is that the stories we tell about ourselves are only a facet of the truth. Reality is always more nuanced and messier than can ever be captured in stories based on myths.
On the elusive notion of leadership
Introduction
In a post entitled, Macrovisions and Micromanagement, I discussed some of the reasons for the gap between the espoused view of leadership and its actual practice in organisations. The post is based on a research study in which managers in an organization were asked what their jobs entailed. Their responses revolved around themes of leadership – things such as strategy formulation, setting direction and generally acting as enablers rather than administrators. However, when asked to elaborate via examples, most managers spoke of administrative and bureaucratic activities rather than those that involved leadership.
There are many possible reasons for this gap. Some of these include:
- Pressure to display leader-like behaviour: Management literature and education tends to place leadership at the pinnacle of managerial practice. Consequently, there is considerable pressure on managers at the middle and senior levels to display leadership qualities (as defined in management texts).
- The issue of identity: Most managers would like to view themselves as being leaders. As a result, they may unconsciously describe what they do in the flattering language of leadership.
- Gap between job description and actual job: Managers are expected to display leader-like behaviour. However, at the same time, they are held responsible for specific and very tangible results. There is thus a continual pressure to get involved in low-level detail while maintaining the illusion of being a leader.
In the present post I delve further into the question of leadership. Specifically, I explore the possibility that the concept of leadership promoted by management literature is flawed. My discussion is based on a brilliant paper by Lesley Prince entitled, Eating the Menu Rather than the Dinner: Tao and Leadership.
To those who may be rolling their eyes at the reference to religion- stay with me, I think you will find that the content and conclusions of the paper merit serious consideration.
Background and context
The author begins by noting that much of management theorising about leadership is based on the following fundamental assumptions:
- The notion that hierarchies are an inevitable within groups, and that those on the top of the heap must exert control to avoid chaos and anarchy.
- Leadership is a well-defined, independent concept that can be codified and can be the subject of inquiry. In other words, it is possible to formulate principles of leadership that are independent of environment and the actual practice of these principles can be studied.
The above assumptions flow from a western view of management. One of the tenets of such a view is that it is possible to formulate general principles of leadership, independent of the environment in which it is practiced. Indeed this is the very basis of mass education in management: business school curricula would be largely empty if there were no general, environment-independent management principles.
On the other hand, in certain eastern philosophies (Taoism and Zen in particular), the focus is not so much on following prescribed principles or exerting control, but on dealing with circumstances as they are. The latter is a interesting perspective from which to analyse leadership because it emphasises that leadership is a social skill, best learnt through experience rather than theory. The paper is essentially a discussion of how certain precepts of Taoism can aid our understanding of leadership as an experience-based skill.
Taoism and its relevance to understanding leadership
Taoism has mystical connotations in western society because it is often associated with alternative lifestyles and counter-culture groups. However, in reality it is a practical way of life that teaches one to embrace direct experience, avoiding filters of presumption or analysis. The author stresses that it is neither a religion nor a philosophy in the conventional sense. Above all, it emphasises the danger of dogma and the importance of keeping an open mind. As the author puts it:
…it is sufficient to note that the point of Taoist practice is the relatively uncontroversial claim that our habitual understandings and modes of thought, often little more than unexamined assumptions, have a tendency to hijack our ability to apprehend the world, interfere with our perceptions, and often lead us to see what we think we ought (or want) to see rather than what is actually there.
This point highlights the relevance of Taoism in our quest to understand the concept of leadership: perhaps the answer lies in observing how people relate to each other in real-life rather than attempting to force-fit theoretical or empirical models of leadership to situations as advocated by management researchers.
At this point readers may be asking: how can we understand a concept without developing mental models or representations of it? Indeed, it is one of the paradoxes of Taoism that one can understand something without necessarily being able to articulate it. In the same way, the paper is an attempt to get an understanding of the concept of leadership by looking at some of its paradoxical aspects. In the next few sections, we’ll look at some of the seemingly self-contradictory aspects of leadership that are explored in the paper.
The difficulty with definitions
Taoism alludes to the difficulty of using words to describe the essence of Taoism. As the author puts it:
According to Taoism grasping the Tao in mere words is a futile undertaking, like trying to explain the experience of an orange to someone who has never encountered one. In one sense the ideas are pure simplicity, but apt to become complex and nebulous when expressed in words…
He suggests that the same difficulty arises when trying to describe any aspect of social reality: there are so many different variables at play that pinning down the aspect of interest is virtually impossible. Indeed, as the author points out, there are a number of definitions of leadership, each emphasising a different facet of the concept.
Perhaps then, it is futile to attempt to capture the concept in words. However, that does not mean that is impossible to understand it. As the author states, quoting from Keith Grint (a well-known scholar of leadership):
…before I began to study leadership in a serious manner, my knowledge of it was complete. I knew basically all there was to know and I had already spent over a decade practising it.
This insightful line suggests that it is possible to understand what leadership is and what it isn’t, without having to define it. I would hazard an opinion that successful leaders don’t over-think what they do, they simply lead as required by the situations they encounter.
The hidden effect of language
The author highlights some important differences between ancient Chinese (the language in which the original Taoist texts were written) and western languages such as English. One of the most important of these is that Chinese is a verb-based language whereas English is noun-based. An implicit consequence of this is that Chinese emphasises action and relationships between objects whereas English emphasises objects. The relevance of this observation to leadership is as follows: instead of attempting to objectify the concept of leadership, it may be more helpful to understand it in terms of actions and relationships. Once again, this suggests that we should shift our focus on the actions of leadership rather than the words (platitudes?) that define it.
Theological origins
The author makes the interesting suggestion that the dominant view of leadership may have theological origins. This is not as far-fetched as it sounds. Monotheistic religions are based on the notion of an omnipotent being who is essentially responsible for the world as we know it and is, in a sense, in charge. This view suggests that hierarchies are natural and ought to be the way groups are organised which, in turn, leads to the view of a leader as someone who wields power by virtue of their position in the hierarchy. In contrast, in Taoism (in its pure form) there are no omnipotent gods as in the monotheistic religions. It is thus perfectly natural to see the asymmetric distribution of power not as a consequence of hierarchy but as a fact of human existence.
Understanding leadership vs. knowing it
One of the central teachings of Taoism is to seek direct experience, free from preconceptions of any kind. This principle is in direct conflict with the way in which researchers attempt to study and understand concepts such as leadership. Typically, researchers make hypotheses, build models and test them against reality. They objectify the thing to be studied and analyse it through the lens of their pre-existing knowledge. Instead a case-study based approach that focuses on the actual experience of leadership may be more fruitful. As the author put it:
The conceptual tangles and contradictions in leadership that seem to be an inevitable part of the models derived from the empirical and quasi-empirical methods of the western tradition often cause more confusion than clarity when people try to apply them. In contrast an approach derived from the theoretical naivete (but conceptual sophistication) of Taoism generates powerful insights that are often difficult to express in words. Part of the key here, perhaps, is to consider leadership not as a set of intellectual principles, but much more as a set of experientially located and responsive relational skills-in-process…
A couple of lines later, he goes,
…there seems to be a stubborn adherence to an old-fashioned objectivism, particularly in the persistence of the subject-object dichotomy. This inevitably excludes the felt and experienced realities of power, influence and involvement in the leadership relation, and this has generated some of the more intractable problems we face when studying leadership. If our models are to have any value they must speak to and from experience, even if this seems messy and inchoate at times.
Although it may be difficult to capture in words, leadership is far from a fuzzy notion: given a situation, most people just know if leadership is being displayed (or not). We understand leadership because we know it when we see it.
Labels do not make a leader
Although it is generally recognised that calling someone a leader doesn’t make them one, most organisations still conflate leadership with positions and titles. The fact that high level management roles are often termed “leadership positions” is proof that this misconception is rife.
Moreover, as the author states:
…the conflation of `leader’ with any of the available position labels, makes the definition of `leadership’ and `leader’ completely superfluous – all one needs is a specification of position within a hierarchy, and all else follows. Except of course that it doesn’t, because we should still have to explain why some leaders by such a definition come to be regarded as fools, idiots, incompetents and charlatans.
Perhaps the most insidious feature of the confusion between position and leadership is that it devalues the work of those who are in subordinate roles by presuming that they are somehow unable to display leadership qualities. They are considered passive players whose job it is to follow. Ronald Heifetz’s brilliant work on leadership speaks to this very issue. As he states in this interview:
In our society, we carry a common notion of the leader as the person with the vision, who then gets people to buy in, to align themselves with that vision. This notion is bankrupt and dangerous, because the leaders who have done good for their communities and organizations are not the ones who came up with the vision. If we picture them as the conductor of an orchestra, they are good at embodying the soul of the music. These leaders are good at articulating the transcendent values of the organization or community. But it’s not their vision.
The leader is an enabler, not an oracle who has all the answers.
Doing by non-doing
Another central teaching of Taoism is the concept of non-doing. Just to be clear, this should not be interpreted as inaction. Rather, it is effortless action. In the context of leadership, there are two aspects of non-doing that are particularly relevant. They are:
- Acting without any preconceived ideas of what leadership is. That is, acting in a manner that is most appropriate to the situation at hand, without worrying about what convention might deem as leader-like behaviour.
- Creating a work environment in which people can operate autonomously and, where required, collaborate spontaneously. Instead of attempting to control events and people, the emphasis is on creating the conditions that are conducive to high quality work.
As the author puts it, “non-interference as an essential quality of leadership”
Unconventional leadership
In essence, the teachings of Taoism urge us to experience things as they are. However, this is not the same as accepting standard conventions or interpretations of how things are. The failure to appreciate the difference is the reason why many people dismiss much of this as mystical claptrap. Further, it should be emphasised that one does not have to be a revolutionary: the point is not to do battle with the system or overturn convention; it is not to be a prisoner of convention, to be able to step outside of it when the situation demands.
Conclusion
I have to say, this is one of the most delightful and stimulating papers I have ever read. Although it has been published in a research journal, there are some brilliant insights in it for managers, leaders and those who don’t know the difference between the two.
The author quotes from Alan Watts at the end of the paper, and I can think of no better way to end this review:
I have associated and studied with the `objective observers’ and am convinced that, for all their virtues, they invariably miss the point and eat the menu instead of the dinner. I have also been on the inside of a traditional hierarchy . . . and am equally convinced that from this position one does not know what dinner is being eaten. In such a position one becomes technically `idiotic’, which is to say, out of communication with those who do not belong to the fold.
The central message of the paper is nicely summarised in its title which, though intended to take a gentle dig at scholars of leadership, applies rather well to many who claim to be leaders. Indeed, many so-called leaders act according to what books, gurus and consultants tell them rather than respond to the situation at hand. In this sense they do indeed eat the menu rather than the dinner
Eight to Late 